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Orange-juice futures have declined 19% since Dec. 19, sending many investors to the exits. But they could find themselves sitting on the sidelines as the market surges.

The exodus occurred as the market fell. Investors saw prospects for higher prices fade as they took into account warmer-than-usual temperatures in Florida, which cut the risk of a freeze that would reduce output. The state produces about three-quarters of the oranges used for juice in the U.S.

With little chance of higher prices, the size of the market shriveled. The number of unhedged orange-juice futures contracts—a measure of trading activity known as open interest—has fallen 21%, from 26,646 to 21,111 contracts since mid-December.

However, few have fully factored in the shadow over the state's orange groves: citrus greening. The disease, which causes underdeveloped fruit to fall from trees, is wreaking havoc on this year's harvest.

The resulting slash in supply should send prices higher in the coming months.

The number of unsalvageable oranges projected to fall from the state's trees this season could be the highest in four decades, the U.S. Department of Agriculture says. In its last two monthly production forecasts, the USDA cut its estimates for Florida's 2012-13 crop, which began Oct. 1, by a total 7.8%, to 142 million 90-pound boxes. That would be the lowest output in four seasons.

"I'm 67 years old. I grew up in a grove, and I have never seen trees drop fruit like this, other than [during] a freeze," says Vic Story, owner of 2,000 acres of citrus groves in Lake Wales, Fla.

In the past, freezes have significantly lowered Florida's orange output. But farmers say that the damage caused by citrus greening could be as bad or worse.

The state's citrus industry has been fighting the disease since 2005, when it was first detected. But farmers say the current crop is the worst-hit yet. Trees have been particularly vulnerable to citrus greening this season because drier-than-normal weather in the spring and fall stressed the trees and made them more susceptible.

Boyd Cruel, a senior analyst at Vision Financial Markets in Chicago, expects a further one-to-two million box reduction in February's USDA forecast.

Orange juice for March delivery on the ICE Futures U.S. exchange settled 2% higher, at $1.1455 a pound on Friday, a two-week high.

To be sure, prices could continue to fall if declining consumer demand for the breakfast-table staple accelerates. Total U.S. orange-juice sales have been falling since 2010. For the four weeks ended on Dec. 22, the last period for which data are available, total domestic retail sales of orange juice fell 4.3% in volume and 3.4% in revenue from a similar period of time a year earlier, according to Nielsen data published by the Florida Department of Citrus.

However, the gnawing evidence of citrus greening is hard to miss.

"You can ride down through the grove and (in some places) the whole tree is infected, but in some others, it's one limb, and there's a pile of fruit on the ground beneath that diseased limb," says Lenwood Hollister, the owner of a 150-acre citrus grove in Winter Haven, Fla.

"Some [oranges] look undersized—instead of being almost the size of a baseball, maybe it's only the size of a golf ball or a tennis ball," he adds.